Good basic financial planning article (on-line link)

jkom51August 5, 2009

I ran across this article (I have a paid subscription to receive the hard copy magazine) and it's available for free on the website. It's a good basic article on financial planning but note the referral links are aimed at my local area, which is the San Francisco Bay Area, specifically Alameda and Contra Costa counties.

The article, however, is pretty good basic advice for anyone. It is titled "Show Me the Money - Financial Planning for dummies (and these days, aren't we all?)". Julia Park Tracey, the author, is a regular columnist and writes monthly on a wide variety of topics.

My ONLY disagreement with the article is the segment on making a financial plan. She makes it sound relatively easy; however, there are many ways to produce a financial plan and almost always the cheapies are spit out by a software program. This quickie-type product can be okay if your situation is simple and especially if you're still young (under 40, I'd say). But don't ever think that a cheapie financial plan is as good as a truly customized, in-depth financial plan. The latter takes a lot of work! I used to work with a woman who created these, and it took her several weeks of analysis and evaluation for each individual plan she produced. Such a heavily customized plan would be worth it only if you had sufficient net worth to justify the high cost - I'd say, anyone comfortably in the mid-7 figure net value range would be a candidate.

For the rest of us, a software program is cheaper and can at least be a reasonable starting point. You just need to remember the old computer adage: GIGO, or garbage in, garbage out. The quality of the product you get is dependent upon good data from you, and skillful work by the advisor you're using (who hopefully is an RIA, or Registered Investment Advisor, in one of the fields that certifies financial professionals for fiduciary responsibility).

Also, remember that a financial plan is only a roadmap to get you from Point A (where you are) to Points B, C and D (your short, medium and long-term goals). Those goals will change over time few of us want the same thing at 25 that we did at 15; nor will we want the same things at 60 that we did at 30. Any life-changing event, which is usually defined as marriage, divorce, death, or birth  will inevitably force a change in those goals, meaning the financial plan must be modified.

Like a will or trust, these are not immutable, set-in-stone documents. They are Âliving  as you and your circumstances change, so must they.

May we always plan well and wisely to the best of our abilities as we travel through life!

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This is such an interesting topic. I wonder why nobody else has responded.

jkom51-"I ran across this article (I have a paid subscription to receive the hard copy magazine) and it's available for free on the website. It's a good basic article on financial planning but note the referral links are aimed at my local area, which is the San Francisco Bay Area, specifically Alameda and Contra Costa counties.

The article, however, is pretty good basic advice for anyone. My ONLY disagreement with the article is the segment on making a financial plan. She makes it sound relatively easy; however, there are many ways to produce a financial plan and almost always the cheapies are spit out by a software program."

My ONLY disagreement is that this seems to be a pitch for financial planners in your area. Perhaps your ex-employer (independent CFP)?

The article you provided a link to said:

"Questions to ask a potential financial planner include: What is your basic approach to financial planning? What services do you offer? What is your area of specialization? What kinds of clients do you serve, and do you require a minimum net worth or income? How do you prepare a plan? How will you address my particular needs? How are you paid, and what are the typical costs? What is your professional background?

Make sure the adviser is a registered broker with credentials, a license to operate, and the backing of a company for financial liability. Getting some information about this prospective financial whiz will also help you feel more comfortable in taking his or her advice. In other words, money knowledge is money power."

Make sure the adviser is a registered broker with credentials, etc? Lol. In another thread you said: "the licensing for the CFP designation is the strictest. A CFP is required to have a fiduciary duty to his/her clients: no ifs, ands, or buts. Very few other advisor/planner titles can say the same."

The former chairman of the NASDAQ said that Bernie Madoff's credentials looked solid. There were absolutely no signs of problems, regulators say. Anyone who would have checked Madoff's record would have found that his licensing and paperwork were in order.

This was also the case with our previous CFP. He was a broker/RIA with several licenses. He stole stock certificates, lied regularly, stuck us in junk bonds all the while claiming to represent OUR interests. We complained to his supervisor, the compliance officer, the CFP board, NAPFA, NASAA, FINRA, NASDAQ, DOJ, etc, and anyone who would listen, but NOBODY seemed to want to do anything. Why? Because they were more interested in protecting the perpetrator/thief than they were the investor(s). So much for 'fiduciary' duty.

The global financial services industry saw nearly $10 trillion of professionally managed assets disappear in 2008, with more than half of the decline coming in the U.S.. I'm sure most financial planners accepted responsibility for watching people's life savings wither. NOT!

Is it any wonder why people are sitting on cash instead of heading back to the craps/brokerage tables?

So long as the financial/regulatory decks continue to be loaded in favor of the perpetrators/ponzi scammers, etc, people will not trust simplistic advice in a public forum.

Joyfulguy is right. He was a financial planner for years yet is always encouraging people to learn how to manage their own money.

Perhaps those 'cheapie' software programs aren't so bad after all.

Links that might be useful:

It's Easy for Brokers to Erase Complaints From Their Records

Financial Advisors Financial Consultants - Top 10 Myths

    Bookmark   August 10, 2009 at 4:24PM
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Why it pays to do a background check on those who might be managing your money.

NAPFA Fraud and Breach of Duty
by Errold Moody
June 17, 2009

If you know the industry, you are aware that a past president of NAPFA (National Association of Personal Financial Advisors) has been indicted for kickbacks on client accounts. Then we have a more publicized screwing of a New York Times journalist and his NAPFA advisor. And another NAPFA member in Ohio is indicted. Obviously those are just the ones that have been caught recently.

Of course the NAPFA home office reasserts its members' statement to the highest fiduciary standards, blah, blah, blah. NAPFA is a joke and always has been. As I have repeated, "it is a lot easier to talk about your ethics than to stand up for them". NAPFA has always been a fraudulent, unethical and even 'illegal' entity since it has never had legal members in most states and certainly the most populous- California. But they get all the press because of the rhetoric on ethics and fiduciary standards by the press which is generally very incompetent. Or stupid. Or they just don't care.

Actually not much different from the rhetoric from the CFP Board of Standards.

As stated, out of 8000 CFPs in California, all NAPFA members, all the thousands upon thousands of FPA members there is only one in the state who is fully licensed and legal to offer comprehensive fee planning. That is not a misprint- there is just one. And all the planning organizations including the CPA Society were told to comply with the law and all have refused. They can get away with is since the states do not have the money to follow through. But why is that at all necessary when you are dealing with the highest integrity to begin with??????????

The continuing 'lapse' of public servants and the obvious dearth of journalistic capability and integrity is part and parcel of the reason we have taken such a financial bloodbath from 2000 forward. It will not cease as long as ethics is just a word by the various planning organizations that just like to lie and deceive under the banner of "fiduciary".
Caveat Emptor
Errold F. Moody, Jr.
Life and Disability Insurance Analyst

    Bookmark   August 10, 2009 at 4:29PM
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Sorry for the length of this: It's half-amusing, half-offensive to be accused of shilling for anyone, since Im as self-taught as one can possibly be. Dreamgarden seems to have ignored all my many posts on other threads over the years. So let me restate my (lack of) credentials to reassure you that I have no vested interest in whether anyone ever uses a planner, advisor, broker, or banker. Havent earned a penny from anyone since 2006 when I retired and the last time I met my ex-boss for lunch, I bought HIM lunch, LOL.

For the record, most of my friends and all of my family are like DH & me - we don't have enough liquid assets to be of interest to most financial planners. I have free access to CFPs thru DHs retirement portfolio, but I dont need them.

Why? Because I enjoy finance and investing the same way I enjoy reading history, science, and mystery novels IOW, for the sheer fun of it. I read extensively Ive had a subscription to the on-line WSJournal since it was first offered, and read it every day plus I clip articles obsessively from a variety of websites. But I would NEVER assume that others want to spend their time the same way.

Old Joyful, for instance, likes to invest in individual stocks. He and I had a recent discussion thread about this. I have no interest in anything but mutual funds. Individual stocks dont fit into our tax and financial situation. I have the healthiest respect for his knowledge and acumen, but the fact remains, he lives in Canada and I live in the US. My financial planning is going to be very different than his, just as my goals are different.

I know from our own experience how hard it is to sit down and do estate planning. We dont have much of an estate compared to many, yet it took us decades to learn to identify the things we needed to do, so we could finally do the things we wanted to do. Ignorance is most certainly NOT bliss, as we, and so many others, have discovered!

I am a firm believer that we should be teaching some of this stuff in school. The world has changed rapidly and drastically, and us middle-class Boomers are stuck trying to figure out a world so much more dangerous than our parents grew up with.

If you read my post more carefully, you would see that I wrote that even cheapie (e.g., simple) plans can at least provide a starting point. I do my own planning, using the WSJournal calculators (a subset of which are available on Schwabs website, or so Ive been told). Ive tried others on the web, but wasnt satisfied as they cant be altered to fit our own unusual circumstances.

If a simple planning software can help someone, all to the good. I havent found them very helpful, but that doesnt mean I call them all garbage. WSJs toolset comes closest to allowing me to set the appropriate parameters, without having to pay someone to do a plan for us. Why should I pay, when I have the knowledge to do it myself? Its not hard, it just takes some effort and decision-making.

THIS is what a planner is for: to help you (if you cant do it yourself) quantify where you are right now, and where you want to be. This is related to investing, but investing is only a very modest part of it. Its the planning process thats critical, yet not well understood.

YOU must do the decision-making. No software program or customized plan means anything if you cant accept the reality of what your current circumstances are, and are willing to work at reaching your goals.

I recently talked a young family member out of seeing a planner because I was able to help her identify some long-term goals. She also needed some very basic help diversifying her portfolio. In a decade or so they should probably meet with a planner to ensure theyre on track for whatever their goals are at that time. But until then I told her there was no reason to consult with anyone unless a life-changing event occurs. Its more important for her to have all legal docs in order, at this stage of life.

I learned a lot from my ex-boss "G", but I have never referred anyone to him. The people I know who have enough money for financial advisors, already have them. The one time I was emailed off-line to ask for an intro, I refused to do so as the specific circumstances of that person made it inappropriate, in my view.

"G" is semi-retired, but stays in the business because he loves working with people. He does a lot of pro bono work and is both well known and respected here as he's been active in professional organizations for over 30 yrs now. He trains his office staff not so much on what to do, but what NOT to do. He is ethical and very, very precise about working for the good of his clients, which is why he has many families who are second- and third-generation clients.

BTW, Madoffs clients should have known something was "funny" just in the fact he had them writing out checks to his name. Thats a definite no-no the assets should always be held by a third-party institution.

The woman (also a CFP) who works in "Gs" office and produces the financial plans is a former elder care specialist who got into the financial side late in life. These customized plans cost a minimum of $4K and range up to $10K. They are certainly NOT for everyone, but when appropriate, can make a huge difference in someone's life. Most people dont need them, but the ones who do, need them a great deal! I worked with some of those clients, and their lives were definitely better for having gotten a good financial plan and then executed it properly.

Actually, now that I think of it I did refer someone to my ex-boss. I told my DH that if I die before he does, he's to sell the house (I maintain it and the garden in addition to all the finances; he has no interest in such things), take the insurance proceeds, and bring the money to "G" to handle.

You did not have a good advisor. Thats not your fault. Its hard to evaluate credentials when youre on that steep learning curve. But a good advisor isnt looking for the next hot thing for you a good advisor helps you identify your goals and gives you a roadmap on how to get from where you are to where you want to be. A good advisor says "no" to you almost as often as s/he says "yes."

Its important, but difficult, to learn how to differentiate the good from the bad. The more educated we are in this area, the better we can tell who can help us and who cannot.

Id liken financial planning/investing to painting a room. You can do it the sloppy easy way. You can do a "sorta-kinda" okay paintjob, shoving the furniture out the way and covering it. Or, you can do more extensive prep work: masking the moldings, laying dropcloths, priming and using two coats. You can use cheap paint and cheap brushes. You can use top quality paint and the best brushes or rollers. Its always your choice. Each method gets the job done, to varying levels of satisfaction, cost, time expended, and durability.

Saying that **ALL** CFPs are worthless is like saying all professional painters are worthless. Some are, and some arent. Some people need one all the time/every time, and some only need one on occasion. It isnt for me OR for you to make that unilateral judgment. Using a pro for anything is always an individual decision that should never be taken lightly. Nor should that decision be disparaged, once made.

Often a pro does do a better job than an amateur can. Sure, a talented amateur can sometimes better a pro but they need the talent, the interest, the skill, and the time. Not everyone has those in equal measure. To expect it of every person is unrealistic and unfair.

I feel fortunate to have had the generous and thoughtful assistance of others in my life. Weve had some serious setbacks that could easily have turned out badly, but in the end everything worked out (so far at least!). If I can help others avoid some of the mistakes we've made, then I feel its worth the effort.

We did okay (my ROI over 25 yrs is way better than average), but perhaps we could have done better if we hadnt been so ignorant for so long. We were at times the recipients of sheer dumb luck, but thats something one shouldnt be counting on to happen.

Dreamgarden, may you have better luck in the future finding people or resources able to help you.

    Bookmark   August 12, 2009 at 1:59AM
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